An emotional investment: getting to the heart of pensions saving

Leadership guru Simon Sinek famously stated “When people are financially invested, they want a return. When people are emotionally invested, they want to contribute”. Well, a little more emotional investment in pensions is certainly needed if employee contributions are going to reach adequate levels.

Numerous employers don’t realise that complying with their auto-enrolment duties is merely the beginning and, whilst some are beginning to embrace the engagement challenge, there remains a long way to go.

In fact, research from My Pension Expert research found that 46% of adults aged over 40? had not even checked what they'd saved into their pension?during the previous year.

Many employees still regard pensions as too complex to follow. Indeed, there is a case for avoiding using the word ‘pension’ at all as it can be regarded as something that doesn’t require thought until age 60 – and our current society is centred around instant gratification.??

Perhaps it’s better to introduce the simple concept that if you pay in money then so will your employer and the government, and – with defined contribution (DC) schemes – talk more along the lines of savings generally, explaining that equity values can fluctuate but that regular saving enables you to buy more units when markets are down.

If younger people, in particular, are going to prioritise pensions at a time when they have so many other things to budget for, then simplicity and careful targeting are key.

You could argue you don’t need to explain the ins and outs of their entire pension. Employers and schemes that want to communicate to employees could start more broadly and shallow in detail, first addressing fundamental questions like why they need a pension and what it does for them.

It’s about being more aware of the person who owns the pension, and about what’s going on in their lives that helps trigger what they want to have and when. Many have commonly moved away from blanket communication messages towards giving more targeted information to different groups. The next stage in that progression, which is already happening, is personalisation.

Opportunities are being opened at a fast rate of knots with technological advancements. Dynamic Total reward statements, which enable employees to view all their employee benefits in one place and gain a better understanding of their true value, are playing a key role. Once annually printed documents, employees can now view current information when and where they want.

Total Reward portals and the growing use of podcasts, videos, webinars and social media in communication programmes are proving especially important in engaging the younger generation, who have grown up with their lives revolving around smartphones.

Not forgetting the launch of the Pensions Dashboard from 2023 – to help people keep track of their different pension pots and view all their pensions information in one convenient place – should also boost employee interest in pensions and provide opportunities to engage those who didn’t even know they had one. This new volume of traffic, of deferred members in particular, is relevant to anyone planning a three-to-five-year engagement strategy. But, although there’s still lots of ongoing debate about the details that will appear on Dashboards, such as costs and charges, shouldn’t communication on the basics be a higher priority first? After all, its primary aim is to reconnect people with pensions.

In addition there is the broader environmental, social and governance (ESG) opportunity. The current focus on ESG investing should also be capitalised upon, especially as it’s concerned with long-term issues and pensions is a long-term form of saving. ESG seems a really good way of getting people engaged with money and making them think about where it’s invested. Evidence suggests that younger cohorts are more interested in ESG, but the message also resonates with a wide range of people.

Herein lies the nub of the communications problem. Individuals don’t all fit neatly into broad brush generalisations. You need to actually find out what people believe and care about, not just make assumptions.